Recordpub.com - Kent finances 'losing ground' City expenses outgrow revenues

By Matt Fredmonsky
Record-Courier staff writer
Spend an hour and a half with Kent Budget and Finance Director Barb Rissland and the city's financial state may still be as fuzzy as it was 90 minutes earlier.
But for Rissland, the message is clear.
"We're losing ground," Rissland said.
The city is operating in what can be described as a structural deficit. What does the phrase "structural deficit" mean? It means the yearly growth of the city's expenditures " like personnel costs " are outpacing the growth of the city's revenues, primarily income taxes.
The city's biggest expense " roughly 70 percent of its costs " are related to employees. Those expenses have increased by an average of 4 percent since 2001, while income tax grew at a rate less than 2 percent during the same period.
Income tax revenue is the city's largest revenue source. In 2007, Kent's actual revenue from income taxes was $10.6 million. Comparatively, personnel expenses were approximately $13 million last year.
"That was the basic message of the Blue Ribbon Panel," Rissland said. "If you look at it over time, our revenues are growing at a slower pace than our expenditures."

To an extent, the city has been able to tow the line by keeping operating costs in check. Operation and maintenance costs were $6.4 million in 2002; those costs grew slightly to $6.8 million this year.
The city also saved costs with position vacancies.
As of April, eight positions were vacant with a net savings of $185,101. In 2007, 12.5 full-time equivalent positions were vacant at a savings of $787,799. In 2006, Kent saved $631,131 with nine vacancies.
"The only reason we maintained as well as we did is because we've had quite a few positions vacant ... which makes a big impact," Rissland said.
Despite efforts, the city has bottomed out three times since 2000. In 2001, expenses exceeded revenues by about $1.1 million. In 2003, the expenditure excess was $2.1million. In 2004, it was $1.7 million.
According to Rissland's projections, by 2013 the city will experience a $2.9 million deficit for governmental funds and an overall fund balance deficit of $2.3 million.
Residents have increasingly scrutinized the city's management and accounting practices since Kent City Council began considering increases in income taxes as a means to stave off the point where expenses consistently outweigh revenues.
One of those residents is Kelby Persons, a certified public accountant who spent two-and-a-half years auditing municipalities and governmental bodies for an independent public accounting firm.
Persons, who happens to live in the same Kent neighborhood as Rissland, criticizes city budgets as inflated.
"It's what they're budgeting and not what they're spending," Persons said.
Persons has worked on audits for the cities of Rittman and Louisville and Wayne and Lorain counties. He described the phrase "structural deficit" as an economics term and not an accounting term.
"It's probably a good tool, but I don't think it should be the only tool," he said.
Rissland admits her calculations at times can be conservative. But her budget projections show expenses will continue to outpace revenues.
In 11-and-a-half years as mayor, Kent Mayor John Fender said the city's current budget state is the most dire he's seen.
"I think we're at a real crossroads," Fender said. "I tend to believe that even though the Blue Ribbon report is two years old I think there is much validity to it. The economic times have changed, but the validity of the report that there's a need for money, and some of the recommendations, I think are still very credible today."
Kent's 2007 audit report to the state is available online at the Ohio Auditor's Office Web site, www.auditor.state.oh.us.